Record ETF and ETC demand boosts London Stock Exchange trading volumes

The London Stock Exchange Group (LSE: LSE) revealed a further month-on-month increase in trading volumes in October, the number of trades executed on the LSE rose by 8%. The monthly volume report also reflected the increasing prominence of ETF (Exchange Traded Funds) and ETC (Exchange Traded Commodities) on the London Stock Exchange (LSE), the average number of trades per day has increased by 84% compared with the same month last year.

 ETFs and ETCs hit record monthly volumes for trading in ETFs and ETCs across the Group, the number of trades increased substantially with a 76% increase compared with October 2008, similarly the average daily value traded was up by 40% to £448 million.

An Exchange Traded Fund is a listed security which tracks a specified financial instrument such as a stock index or futures contract.

ETF shares are created by a process called creation and redemption, which occurs on exchange once a day in the primary market, this process can essentially provide unlimited liquidity to the fund. Authorised Participants and the ETF providers jointly create new shares in exchange for the underlying security or cash equivalents.

iShares are one of the UK market’s major ETF providers, the group was recently acquired by private equity group Blackrock and provides many different ETFs. iShares offer ETFS that track most international equity indices and sectors.

Similarly ETCs work by tracking both physical commodities and commodity futures. Exchange Traded Commodities (ETCs) enable investors to gain exposure to commodities without trading futures or taking physical delivery.

Elsewhere on the LSE, UK Cash Equities climbed 6% month-on-month however 2008’s unprecedented volatility still casts a substantial shadow over year-on-year comparatives which show a 39% decrease in volume. During October the total number of UK equity trades during the month was 12.5 million.

The improving volume trend was encountered across the LSE Group’s international markets. In Italy Borse Italiana volumes rose 14% although compared with 2008 volumes were 11% lower. In Milan the total number of trades was 5.9 million and the total value traded was €69.4 billion.

On the International Order Book, the average daily value traded in international stocks actually rose 11% year on year, totalling £770 million, representing an 18% month-on-month increase.  The average daily number of trades was 8% higher than September and up 5% against 2008. Similarly the group’s derivatives and fixed income operations also progressed well, both divisions reported strong double-digit increases in volumes.